THINK Tank: Is a Barneys-Saks Mash up a Smart Idea?
Forrester’s Sucharita Kodali and Valtech’s Shannon Ryan Weigh in
The Breakdown: After months of uncertainty, Barneys reached a stalking horse agreement to sell its assets to brand developer Authentic Brands Group, and investment bank B. Riley Financial, for $271 million on Oct. 24.
If the deal goes through with Authentic Brands, Saks-owner Hudson’s Bay announced plans to license the Barneys name, open Barneys-branded small shops inside several Saks locations and ultimately close the majority of the remaining seven Barneys locations.
It is still unclear as to whether or not Barneys’ iconic Manhattan flagship would remain up and running.
The department store filed for Chapter 11 bankruptcy protection in August as they struggled to stay afloat in the competitive retail market. At the time, Barneys announced the closure of its physical store locations in Chicago, Las Vegas and Seattle, in addition to five smaller concept stores and seven Barneys Warehouse locations.
The Weigh In: Forrester’s Sucharita Kodali and Valtech’s Shannon Ryan
RYAN: “I’m not surprised that they’re looking for a way to potentially still capitalize on the brand equity that is contained within the name of Barneys. Obviously in terms of a physical location with the seven stores and a struggling sort of online presence, they just didn’t find the magic formula to be able to allow themselves to continue to push forward.”
KODALI: “I find it a little puzzling. I don’t know what it means to have a multi-brand multi-category brand within another multi-brand, multi-category, yeah. Right? I mean, it’d be putting like a Target shop in a Walmart and it’s like, “Well what does that mean?” Is it the private label stuff? Is it … because so much of the merchandise overlaps anyway.”
KODALI: “Even if it’s like a department. Sephora did have shop in shops in JCPenney’s, and I think Kohl’s as well, right? And that made sense because Sephora didn’t necessarily have an overlapping inventory mix and it was the statement that that retailer was making for beauty. So that makes sense.”
KODALI: “So if there’s a vision and there’s really distinct clarity around what does this stand for, I think that there’s certainly potential.”
RYAN: “I think one of the interesting things that something like an Authentic Brand goes … part of me thinks this is distressed money chasing bad assets. I’m not so sure I would want to be in the department store business these days at all and therefore, to buy another store that essentially has a similar format — there are way smarter people in the world than I am for sure who have thought through this problem but I really struggle to see how that works in a way that drives the bottom line.”
Kodali agreed that department stores and in particular apparel are difficult to profit from.
KODALI: “These particular department stores are heavily anchored in apparel, which is one of the most challenging sectors in retail.”
One saving grace is if Hudson Bay and Saks are able to create something unique out of this, there is a possibility of turning things around, according to Ryan.
RYAN: “Possibly if they add in this element of scarcity and timing that is the fundamental driver of a popup and add it within the store footprint of those existing locations, then maybe there is something innovative to do with that brand equity.”